Marshall, Mich.-based Oaklawn Hospital was downgraded March 29 amid operating losses caused by high labor costs and extended length of stay, and exacerbated by a "substantial reduction" in its 340B program revenues, Fitch Ratings said.
The downgrade to "BBB-" from "BBB" applies both to the community hospital's default rating and on a series of bonds valued at $63.5 million. The outlook is negative.
The new long-term rating does reflect Oaklawn's likely ability to benefit from a stable market position and an expectation it will recover margins, Fitch said.
In response to its operating pressures, Oaklawn has halted some capital projects, including an expansion of its emergency services. The capital budget for fiscal 2024 is $4.7 million.
Oaklawn Hospital has 68 beds and recorded operating revenue of almost $171 million in fiscal 2022, Fitch said.